China’s Future Challenge for the World Economy

Economic policies in the world’s most populous nations, soon to be the world’s largest economy, affect the rest of the world. China’s rising corporate indebtedness could slow investment and lead to rapid depreciation, suggests Martin Wolf for Financial Times. China has a range of responses: following the West’s lead with increased borrowing to stimulate the economy, weakening the currency or applying additional capital controls. Wolf points to a long-term challenge of integrating China into the global financial system: “Experience suggests that simultaneous liberalisation and opening up of fragile financial systems often ends in vast crises.” Wolf refers to the recommendation of Christine Lagarde, managing director of the International Monetary Fund, that greater collective management is required for increased global integration. Global citizens doubt whether politicians are willing to overcome polarization to prepare for the many known long-term challenges. As global consumers, they expect great uncertainty and more crises, many of which could have been avoided, in the years ahead. – YaleGlobal